Climate Change: Private Sector Solutions

The science is unequivocal: without ambitious climate action, the world could grow 4° C warmer within this century.

The consequences could be devastating, a new World Bank report shows: unprecedented heat waves, draught and flooding, increased hunger and malnutrition, and irreversible habitat and biodiversity loss, to name just a few. The worst impacts would be on the poorest people in the poorest countries.

Action is essential. A 4° C (7.2° F) warmer world can, and must be avoided.

No matter what governments do to counter the rise in temperatures from preindustrial levels, most of the investment needed to stabilize the world’s climate must come from the private sector. IFC makes the issue a top priority, financing $1.6 billion in climate business transactions each year and sharing knowledge of ways to drive transformational change. Innovative public-private partnerships (PPPs) are a big part of the solution, and a focal point for IFC.

IFC leaders were recently at the UN climate change talks in Doha, Qatar, promoting the private sector’s critical role in building a lower-carbon economy. This included spreading lessons of landmark renewable energy PPPs in countries that need to diversify away from fossil fuels:

South Africa: The $1.3 billion Abengoa KaXu and Abengoa Khi plants in the Northern Cape Province are sub-Saharan Africa’s first to use concentrated solar power (CSP) technology. Using mirrors to reflect and concentrate the sun’s rays into steam-powered turbines, they generate 150 MW for the local grid. Owned by a private Spanish-South African consortium, the projects reached financial close in Johannesburg on November 6, with IFC lending approximately $143 million and coordinating approximately $264 million in parallel loans from others. One key: the $41.5 million in concessional loans from the multi-donor Clean Technology Fund that IFC blended into the financing package.

India: Using a new model now being scaled up across five states,IFC helped the Gujarat government structure the bidding for a new rooftop solar power project that two private firms, Azure Power of India and SunEdison of the U.S., recently won under 25-year concessions. The project will produce 5 MW next year, but have far greater impact through its replication in other cities.

Transitioning to greater use of solar, hydropower, wind, geothermal, and biomass power in the developing world will require vast investment—far more than governments can provide.

This is why partnerships in renewable energy between businesses, governments, civil society and international financial institutions are core business to IFC, the world’s largest global development finance institution focused on the private sector. But it is only part of the larger solution. So we focus not just on supply, but demand—also helping the private sector increase energy efficiency in manufacturing, agribusiness, housing, and other industries as part of the World Bank Group’s support for 130 countries taking action on climate change.